Monthly Coffee Break

Equities, Monthly Coffee Break

Positive economic surprises boosted markets

European equity markets continued their uptrend over the past four weeks on the back of positive economic surprises and a sharp fall in headline inflation as base effects in energy started to drag. The positive market trend was clearly driven by large caps and defensive growth sectors.
Fixed Income, Monthly Coffee Break

Recession remains unlikely in the euro zone

April saw positive performances for risky markets, with equities and convertible bonds outperforming, followed by high yield. Government bonds underperformed across most major markets except Japan. We also saw a recovery of subordinated and CoCo bonds to the detriment of more senior issues.
Absolute Return, Monthly Coffee Break

The market is walking a thin line between financial safety and FOMO

The market narrative remains very cautious and divided as to the path to follow over the next few quarters. While some investors prefer to look to the encouraging observable data points being published regarding earnings and inflation, many are hanging back, pointing to an inevitable deterioration of consumer spending and liquidity provided by banks to finance the economy.
Asset Allocation, Monthly Coffee Break

Take me to the next stage

In our economic and market scenarios, the next stage points to lower growth and gradually lower inflation in the US by the end of 2024. Consequently, lower interest rates should follow, and we keep a long duration bias in fixed income. We expect a soft landing and are buyers of Investment grade credit and Emerging market debt since the carry is attractive in this outcome. Regarding equities, we keep a neutral stance considering the limited upside potential as several uncertainties weigh on the outlook. If risks to the outlook materialise or markets become too complacent, we would stand ready to reduce exposure.
Absolute Return, Monthly Coffee Break

“Lego House"

March was a challenging and volatile month, with investment sentiment going through a whole variety of shades in a single month.
Fixed Income, Monthly Coffee Break

High Yield and Convertibles led Fixed Income Markets

In March, markets were driven by the strong performance of most asset classes, confirming a general trend year-to-date in which investors in most major asset classes have been rewarded with positive returns.
Equities, Monthly Coffee Break

Balanced approach warranted by lack of visibility

European equity markets have rebounded strongly since mid-March after the sell-off due to the collapse of Silicon Valley Bank in the United States and the financial turmoil around Crédit Suisse.
Equities, Monthly Coffee Break

Balanced approach warranted by lack of visibility

The collapse of the Silicon Valley Bank, the 16th largest bank in the United States, triggered a shockwave through financial markets. Despite their resilience, European equity markets nevertheless also had to give away some ground in this environment. During this correction, and especially since the beginning of March, growth stocks outperformed value stocks, and large caps outperformed small caps.
Monthly Coffee Break, Absolute Return

Economic strength and inflation more resilient than expected

During February, economic and inflation data came in slightly above expectations, which helped cool the market down. Central banks reiterated the message that the market should expect monetary policy to maintain its course until we see significant signs that inflation is abating.
Asset Allocation, Monthly Coffee Break

Financial stability and price stability

Uncertainties on US and European financials have replaced the better economic growth outlook in investor’s minds. Suddenly, the improvement in activity is now mitigated by financial vulnerabilities and inflation stickiness.
Fixed Income, Monthly Coffee Break

The return of decorrelation between risky assets and rates

In the weeks to mid-March, the dominating theme was perhaps the return of decorrelation between risky assets and rates. All G4 sovereign issuers saw falls in their 10-year yields, while major equity indices all took hits. Credit spreads also widened.
Fixed Income, Monthly Coffee Break

A sense of relief

The beginning of the year provided some relief to global investors and allowed them to claw back some of the losses they suffered in the previous year.
Asset Allocation, Monthly Coffee Break

Better outlook increasingly reflected in markets

The better outlook on the growth/inflation mix for the year ahead has quickly been incorporated by risky assets, from equities to high yield via credit markets. As the extreme investor pessimism of last October is now in the distant past, we are reducing our overall equity allocation to a more neutral stance.
Equities, Monthly Coffee Break

Rallying global equities driven by growth stocks

European equity markets made a very strong start to the year, supported by easing inflation figures, both in the US and Europe, the surprisingly quick end to the zero-Covid policy in China and the relatively mild winter that has defused the energy crisis in Europe and thus the risk of a deep winter recession.
Monthly Coffee Break, Absolute Return

A message in a bottle …

2023 started out on the right foot for holders of financial assets, as the overall performance of equities and bonds was positive. However, a significant part of the financial community is bedazzled by the vigour of the rebound.
Equities, Monthly Coffee Break

Hawkish Fed weighed on market sentiment

European equity markets registered a significant rebound from the previous month. This was mainly driven by China’s decision to ease its zero COVID-19 policy.
Fixed Income, Monthly Coffee Break

Signs of weakening inflation

Market exuberance continued in December and through the first days of January, as risky assets posted a strong performance, once again on the back of signs of weakening inflation and the hope that central banks would strike a less hawkish tone.
Asset Allocation, Monthly Coffee Break

Temperatures rising, inflation cooling

We have started 2023 with a preference for equities over bonds, as our investment strategy turned more constructive on attractive price levels in October.
Equities, Monthly Coffee Break

Stock markets continued their recovery

After a slightly hesitant start, European stock markets continued their recovery from the October lows and ended November well into the green.
Fixed Income, Monthly Coffee Break

First true relief of the year

After a bruising first 10 months in 2022 that saw fixed income investors suffering near-record losses in most asset classes, November offered the first true relief of the year.
Asset Allocation, Monthly Coffee Break

The next stage

We end 2022 with a preference for equities over bonds, as our investment strategy became more constructive on attractive price levels at the start of the fourth quarter.
Absolute Return, Monthly Coffee Break

Don’t forget the DIVA

In 2022, the markets repriced risk premiums in financial assets, quickly adjusting to the inflation risk and to the interest rate hikes implemented by central banks that followed.
Asset Allocation, Monthly Coffee Break

Fundamental support for our constructive view

In October, we turned more constructive based on our analysis of the market configuration. This month, fundamental support provides further reasons to maintain this stance.

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